Discounted mortgages could fair better than Fixed Rates due to pricing volatility
With the money markets in a state of flux, Richard Campo, mortgage adviser and CEO of Rose Capital believes that Discounted mortgages may be the solution for many borrowers. Richard says:
“Due to the instability of the UK economy and the volatility in money markets, we’re seeing mortgage lenders hiking up rates at a pace we haven’t seen since 2008. In fact, on Monday, in just one day, we saw upwards of 19 lenders re-price, with 3 lenders pull out the market entirely blaming market volatility. It’s little wonder that borrowers are confused as to how they secure in an affordable deal when remortgaging or worse still, are looking to line up a new purchase.
“With money markets in such a state of flux, it is very hard to tell the best path forward at present. The prevailing logic will be – fix for as long as you can. But with such disparities in pricing, some Discounted rates look exceptional value, as they are as low at 2% cheaper than a longer term fixed rate. Which means even if rates go up by 4% you would only pay the same level of interest, so that is your opportunity cost. There is an added factor that lenders may not increase the margins on their Standard Variable Rates as much as the Bank of England, as they have not done so this year, which does mitigate this risk, but this strategy is not for everyone. A good mortgage broker will outline all your options, so you can make an informed decision on what is best for you. In an environment where rates are being pulled daily, you need an expert in your corner that is working for you.”